In this article, we will be taking a look at the 10 materials stocks to buy after the Fed’s new policy.
On September 21, 2022, Jerome Powell, Chair of the Federal Reserve, commented that he and his fellow policymakers would continue attempting to beat inflation down. One of the more recent moves the Fed made in this attempt was another hike in the interest rates. According to Reuters, the hike constituted a rise of about three-quarters of a percentage point for the third time in a row, indicating to the market at large that borrowing costs would continue to rise in 2022. With this particular hike, the Federal Reserve raised the central bank’s benchmark overnight interest rate to about 3% to 3.25%, to the dismay of investors across the country.
In the aftermath of the Federal Reserve’s latest policy decision, the market observed winners and losers in terms of sector performance. While the healthcare sector lagged, falling 0.5%, the materials sector gained 1.7%, becoming leaders in the market in September. In major indexes, the Nasdaq Composite rose by 0.8%, the S&P 500 Index rose 0.7%, and the Dow Jones Industrial Average rose 0.6%. Materials stocks like Air Products & Chemicals, Inc. (NYSE:APD), The Mosaic Company (NYSE:MOS), and BHP Group (NYSE:BHP) are among some of the top names in the sector that have been performing well in comparison to other stocks on the market. Many materials stocks, including several of those listed on our list below, also offer attractive dividends for income investors looking to earn passively.
According to data collected by the S&P Dow Jones Indices this August, most sectors posted losses across the cap spectrum. In the midst of this, the energy sector was the leader among large and mid-cap stocks, while the materials sector was the sole positive performer in the market. Among selected sector indices, the materials sector was also recorded as having a dividend yield of 2.1% as of August 31, 2022. Among S&P mid-cap materials companies, the average dividend yield was 1.7%, while among the small-cap S&P materials companies, the dividend yield stood at 1.1%. These statistics thus also show that materials stocks have been performing as reliable dividend stocks, to the benefit of income investors looking to hedge against inflation. As such, we have compiled a list of the top materials stocks to buy today.
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We can now take a look at the 10 materials stocks to buy after the Fed’s new policy.
Our Methodology
We have selected popular stocks among the 895 hedge funds tracked by Insider Monkey in the second quarter. We have also mentioned key fundamentals for each stock listed, including projected EPS growth and latest earnings, among more. The stocks are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest. Finally, we have also mentioned analyst ratings and price targets for the stocks listed below.
Materials Stocks to Buy After the Fed’s New Policy
10. BHP Group (NYSE:BHP)
Number of Hedge Fund Holders: 19
BHP Group (NYSE:BHP) is a resources company operating in Australia, Europe, China, Japan, India, South Korea, the rest of Asia, North America, South America, and internationally. The company mines, smelts, and refines nickel. It also engages in potash development activities.
An Equal Weight rating was reiterated on shares of BHP Group (NYSE:BHP) on August 12 by Amos Fletcher at Barclays.
BHP Group (NYSE:BHP) jumped by 4.3% in the second week of August following the announcement of strong 2022 results. The company’s earnings and cash flow beat expectations. BHP Group (NYSE:BHP) has a revenue growth rate of 14.25% year over year, alongside an operating cash flow growth of 18.14% year over year. The company also has a one-year dividend growth rate of 7.97%, with a dividend yield of 13.34%.
Fisher Asset Management was the largest stakeholder in BHP Group (NYSE:BHP) in the second quarter, holding over 18 million shares worth $1.01 billion. In total, 19 hedge funds were long the stock, with a total stake value of $1.4 billion.
Like Air Products & Chemicals, Inc. (NYSE:APD) and The Mosaic Company (NYSE:MOS), BHP Group (NYSE:BHP) is among the top materials stocks elite hedge funds are eyeing today.
9. Rio Tinto Group (NYSE:RIO)
Number of Hedge Fund Holders: 24
Rio Tinto Group (NYSE:RIO) is a materials company working to explore, mine, and process mineral resources globally. The company provides aluminum, copper, diamonds, gold, borate, iron ore, and other minerals. It also owns and operates open pit and underground mines, mills, refineries, smelters, power stations, and research and service facilities.
Morgan Stanley’s Alain Gabriel holds an Equal Weight rating on Rio Tinto Group (NYSE:RIO) shares as of August 16.
Rio Tinto Group’s (NYSE:RIO) forward operating cash flow growth is 3.17%. The company also has a year-over-year revenue growth rate of 3.18%. Its dividend yield is 13% as of September 27.
Rio Tinto Group (NYSE:RIO) was found among the 13F holdings of 24 hedge funds in the second quarter, and 26 hedge funds in the previous quarter. Their total stake values were $1.7 billion and $2.5 billion, respectively.
8. MP Materials Corp. (NYSE:MP)
Number of Hedge Fund Holders: 26
MP Materials Corp. (NYSE:MP) is a diversified metals and mining company that owns and operates rare earth mining and processing facilities. The company also owns and operates the Mountain Pass Rare Earth mine based in the Western Hemisphere. It is based in Las Vegas, Nevada.
Baird’s Ben Kallo holds an Outperform rating on shares of MP Materials Corp. (NYSE:MP) as of August 5. The analyst also raised his price target on the stock from $45 to $55.
This August, MP Materials Corp.’s (NYSE:MP) second-quarter results showed that the company nearly doubled its revenue to $143 million, in light of rare earth material demand and rising prices. The company’s second-quarter net income almost tripled to $73.3 million, or $0.38 per share, compared to the $27.2 million figure in the year-earlier quarter. MP Materials Corp. (NYSE:MP) produced about 10,300 metric tons of rare earth oxides during the second quarter, which benefitted the company as the average realized price of this material rose by 90% in the second quarter.
There were 26 hedge funds long MP Materials Corp. (NYSE:MP) in the second quarter, with a total stake value of $1.9 billion. JHL Capital Group was the largest stakeholder in the company, holding 38.2 million shares worth $1.2 billion.
Bernzott Capital Advisors, an investment management firm, mentioned MP Materials Corp. (NYSE:MP) in its first quarter 2022 investor letter. Here’s what the firm said:
“MP Materials (NYSE:MP): This rare earth specialty materials company reported solid earnings driven by higher production and selling prices of neodymium-praseodymium (NdPr), a vital component for the development of magnets used in EV production, wind turbines, drones, robotics, and other industrial applications. Also contributing were offtake agreements with General Motors for magnets and expansion plans for domestic production of magnets making MP the only domestic producer. The balance sheet and cash flow generation remain strong, supportive of expansion plans in the current NdPr pricing environment.”
7. Cleveland-Cliffs Inc. (NYSE:CLF)
Number of Hedge Fund Holders: 29
Cleveland-Cliffs Inc. (NYSE:CLF) is a flat-rolled steel producer operating primarily in North America. The company provides carbon steel products like hot-rolled, cold-rolled, electro-galvanized, hot-dip galvanized, and aluminized steel products, among more. It is based in Cleveland, Ohio.
Credit Suisse’s analyst Curt Woodworth holds an Outperform rating on Cleveland-Cliffs Inc. (NYSE:CLF) shares as of September 22. The analyst also placed a $25 price target on the stock.
The company has a year-over-year revenue growth rate of 81.92%. Cleveland-Cliffs Inc. (NYSE:CLF) also has a working capital growth rate of 33.25% year-over-year. In the second quarter, the company’s revenue of $6.34 billion beat estimates by $226.68 million.
Cleveland-Cliffs Inc. (NYSE:CLF) had 29 hedge funds long its stock in the second quarter, and 48 hedge funds were long the stock in the previous quarter. Their total stake values were $450 million and $1.6 billion, respectively.
6. Steel Dynamics, Inc. (NASDAQ:STLD)
Number of Hedge Fund Holders: 29
Steel Dynamics, Inc. (NASDAQ:STLD) is a materials company operating as a steel producer and metal recycler in the US. The company operates through its Steel Operations, Metals Recycling Operations, and Steel Fabrication Operations segments. It is based in Fort Wayne, Indiana.
An Equal Weight rating was reiterated on shares of Steel Dynamics, Inc. (NASDAQ:STLD) on July 6 by analyst Carlos De Alba at Morgan Stanley. The analyst also placed a $78 price target on the stock.
This August, Steel Dynamics, Inc. (NASDAQ:STLD) declared a $0.34 per share quarterly dividend, payable to shareholders on October 14. The company has a one-year dividend growth rate of 17.65%. Steel Dynamics, Inc. (NASDAQ:STLD) also has a year-over-year operating cash flow growth of 178.76%, and a year-over-year revenue growth rate of 71.39%.
Our hedge fund data shows 29 hedge funds long Steel Dynamics, Inc. (NASDAQ:STLD) in the second quarter, with a total stake value of $282 million. Of these funds, AQR Capital Management was the largest stakeholder in the company, holding 2.1 million shares worth $137.8 million.
Steel Dynamics, Inc. (NASDAQ:STLD), like Air Products & Chemicals, Inc. (NYSE:APD), The Mosaic Company (NYSE:MOS), and BHP Group (NYSE:BHP), is a highly popular materials stock among hedge funds today.
5. United States Steel Corporation (NYSE:X)
Number of Hedge Fund Holders: 30
United States Steel Corporation (NYSE:X) produces flat-rolled and tubular steel products. The company operates mainly in North America and Europe.
Curt Woodworth, an analyst at Credit Suisse, holds an Outperform rating on United States Steel Corporation (NYSE:X) shares as of September 16. The analyst also placed a $37 price target on the shares.
This September, United States Steel Corporation (NYSE:X) estimated its third quarter adjusted net earnings per diluted share to be between $1.9 to $1.95. The company has a one-year dividend growth rate of 300%, with a dividend yield of 1.07%.
United States Steel Corporation (NYSE:X) was found among the 13F holdings of 30 hedge funds in the second quarter. Their total stake value was $617 million.
4. Air Products & Chemicals, Inc. (NYSE:APD)
Number of Hedge Fund Holders: 33
Air Products & Chemicals, Inc. (NYSE:APD) is an industrial gases company providing atmospheric gases, process and specialty gases, equipment, and services. The company is based in Allentown, Pennsylvania.
On August 15, Air Products & Chemicals, Inc. (NYSE:APD) was upgraded from Market Perform to Outperform at BMO Capital by analyst John McNulty. The analyst also raised his price target on the stock from $283 to $321.
Over the next three to five years, the EPS for Air Products & Chemicals, Inc. (NYSE:APD) is expected to rise by 11.54%. The company’s revenue growth rate year over year stands at 22.11%. It also has a dividend yield of 2.79%.
There were 33 hedge funds long Air Products & Chemicals, Inc. (NYSE:APD) in the second quarter, and 39 hedge funds long the stock in the previous quarter. Their total stake values were $375 million and $858 million, respectively.
Matrix Asset Advisors, an asset management company, mentioned Air Products & Chemicals, Inc. (NYSE:APD) in its second quarter 2022 investor letter. Here’s what the firm said:
“Air Products And Chemicals, Inc. (NYSE:APD) is a leading global industrial gas company with very stable returns. The company provides industrial gas in bulk liquid and compressed gas forms as well as via “on-site” dedicated facilities. Because many of its contacts are long-term take or pay agreements, the business is less cyclical than many industrial companies while benefiting during economic upswings. Air Products is a leader in hydrogen fueling systems and infrastructure, and the company sees great potential in the years ahead to extend its leadership. APD is a consistent dividend grower. Its current annual dividend of $6.48 provides a 2.7% yield on June 30.”
3. Corteva, Inc. (NYSE:CTVA)
Number of Hedge Fund Holders: 42
Corteva, Inc. (NYSE:CTVA) is a materials company operating in the agriculture business. The company is based in Indianapolis, Indiana.
Deutsche Bank’s David Begleiter holds a Buy rating on Corteva, Inc. (NYSE:CTVA) shares as of September 15. The analyst also raised his price target on the stock from $68 to $75.
This September, Corteva, Inc. (NYSE:CTVA) announced a new share repurchase program worth $2 billion. This is in addition to the company’s existing $1.5 billion share repurchase program. Over the next three to five years, Corteva, Inc.’s (NYSE:CTVA) EPS is expected to grow by 18.26%, and its dividend yield is 1.03%.
Out of 895 hedge funds tracked in the second quarter, 42 funds were long Corteva, Inc. (NYSE:CTVA). Their total stake value was $966 million.
2. The Mosaic Company (NYSE:MOS)
Number of Hedge Fund Holders: 50
The Mosaic Company (NYSE:MOS) produces and markets concentrated phosphate and potash crop nutrients. The company operates in North America and internationally.
On August 3, The Mosaic Company (NYSE:MOS) was upgraded from Neutral to Buy by analyst P.J. Juvekar at Citigroup. The analyst also raised his price target on the stock from $57 to $61.
This August, The Mosaic Company (NYSE:MOS) announced that its July revenue grew exponentially compared to the July revenue a year ago. This July, the company brought in $391 million through its potash unit, compared to last year’s $191 million figure. The Mosaic Company (NYSE:MOS) has a one-year dividend growth rate of 33.33%, with a dividend yield of 1.25%.
The Mosaic Company (NYSE:MOS) had 50 hedge funds long its stock in the stock quarter, with a total stake value of $895 million. In comparison, 66 hedge funds were long the stock in the previous quarter, with a total stake value of $1.5 billion.
1. CF Industries Holdings, Inc. (NYSE:CF)
Number of Hedge Fund Holders: 52
CF Industries Holdings, Inc. (NYSE:CF) is a manufacturer and seller of hydrogen and nitrogen products. The company is based in Deerfield, Illinois.
Joshua Spector, an analyst at UBS, holds a Buy rating on CF Industries Holdings, Inc. (NYSE:CF) shares as of August 25. The analyst also raised his price target on the stock from $108 to $128.
CF Industries Holdings, Inc. (NYSE:CF) has a year-over-year revenue growth rate of 121.57%. Over the next three to five years, the company’s EPS is expected to rise by 6%. CF Industries Holdings, Inc. (NYSE:CF) also has a one-year dividend growth rate of 8.33%, with a dividend yield of 1.69%.
Our hedge fund data shows 52 hedge funds long CF Industries Holdings, Inc. (NYSE:CF) in the second quarter. Their total stake value was $1.3 billion.
Carillon Tower Advisers, an investment management firm, mentioned CF Industries Holdings, Inc. (NYSE:CF) in its first quarter 2022 investor letter. Here’s what it said:
“Stock selection contributed the most while sector allocation was also positive. An underweight to communication services and an overweight to energy helped performance, while an underweight to consumer staples and an overweight to materials detracted. Stock selection was strong within healthcare and materials but was weak within information technology and industrials. CF Industries (NYSE:CF) manufactures and distributes nitrogen fertilizer. The stock rose as Russia’s invasion of Ukraine accelerated already rising fertilizer prices.”
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Disclosure: None. 10 Best Materials Stocks to Buy After Fed’s Latest Rate Hike is originally published on Insider Monkey.
